The transfer balance cap is a limit on the total amount of superannuation you can transfer into the tax-free pension (retirement) phase. From 1 July 2023, the general transfer balance cap is $1.9 million. Once your pension account reaches this limit, any additional super must remain in the accumulation phase, where earnings are taxed at 15%.
For SMSF members, this means careful planning is essential when moving into retirement. If you exceed the transfer balance cap, the ATO will require you to commute (reverse) the excess back into accumulation phase, and you may face an excess transfer balance tax on notional earnings. Keeping accurate transfer balance account records and monitoring indexation adjustments is an important trustee responsibility.